The Austin metro area had the nation’s second-fastest-growing economy in 2015, according to new federal data.
The regional economy’s gross domestic product, or GDP, grew at a 5 percent rate last year — second in the nation among major U.S. cities only to Austin’s neighbor to the south, San Antonio, which grew at a 5.9 percent rate, according to preliminary data from the U.S. Bureau of Economic Analysis.
“Austin was a bright spot for Texas during a year when some parts of the state struggled,” said Karl Kuykendall, an economist at IHS Economics. Last year “was a relatively tough year for Texas overall, given the oil downturn, but Austin was mostly insulated.”
While the agency regularly revises such data, the rate of acceleration suggests that the Austin-Round Rock metro area has maintained robust economic growth since the recession, experts say. Since that time, the region has posted annual growth rates of 4 percent or more. Last year, the metro area’s GDP reached $119.9 billion. It had surpassed the $100 billion mark in 2012 and reached $113.9 billion by 2014.
With future data revisions possibly in play, San Antonio-based economist Keith Phillips said it’s possible Austin’s economy actually grew even faster than San Antonio’s did last year.
San Antonio questions
Phillips, assistant vice president and senior economist for the Federal Reserve Bank of Dallas, suggests that the report’s underlying numbers for job growth in mining don’t support a 5.9 percent growth rate for San Antonio. Instead, Phillips places that figure closer to 3.4 percent — putting it behind Austin.
“Something is wrong in the numbers,” he said. “Real GDP growth of 3.4 percent for San Antonio is closer to the truth.”
Austin’s 5 percent GDP growth is “consistent with what we saw with employment numbers,” Phillips said. “It’s consistent with the story we saw last year of strong job growth.”
Meanwhile, the Austin region didn’t see much impact from the decline in the energy sector, as it’s less invested in that industry than many other Texas metro areas.
“The contagion from the decline in the energy sector didn’t hit the I-35 corridor,” Phillips said.
The Bureau of Economic Analysis report shows that growth in Austin was led by the professional and business services sector, which grew by 1.6 percentage points. That sector has been fueled by population gains in the region, which is also tied to booming employment from major companies — among them Apple, Facebook, Google and Amazon — increasing their presence in Austin.
“It’s no surprise that the professional services areas is where most of the GDP growth has occurred. Many of the jobs in professional services are jobs of population growth,” Austin economist Angelos Angelou said.
‘A job machine’
Austin economist Jon Hockenyos said he wasn’t surprised to hear of the GDP growth either. He said the region is evolving as a modern economy that continues to attract both skilled labor and in-demand jobs.
For example, both workers and employers in the professional and business services sector who have flexibility on where they can call home are seeing Austin as an appealing destination.
“We continue to be the place where the modern economy wants to be,” Hockenyos said. “We’ve had a lot of population growth and among people that are with skill sets that are aligned with the modern economy.”
Angelou said the Central Texas region holds as many as 400,000 college and university students — a rarity.
“That doesn’t exist anywhere else in the country,” he said. “Young people are attracted to our community. We have become a job machine.”
Quality of life and relative affordability when compared with markets such as Silicon Valley are key for professional and business service workers, Hockenyos said.
“Folks who have those capacities have a fair amount of flexibility on where they want to work, and companies have a fair amount of flexibility on where they want to be and Austin offers a value package. A super quality of life at a reasonable price — especially compared to the (San Francisco) Bay Area,” he said.
Plus, in Austin “the beer is cold and the music is good and the enchiladas are tasty,” he said.
Angelou said an economic engine that’s virtually firing on all cylinders is driving the region’s current and future economic growth. And a new cylinder — the health and education sector — is on the verge of explosive growth thanks to the new University of Texas medical school.
Other major sources of local jobs — state government, real estate development, technology, education and what Angelou calls the “festival economy,” which includes events such as this weekend’s Austin City Limits Music Festival and the F1 race later this month — will keep that engine revving, he said.
“All of these segments in our economy are performing,” he said. “Austin is going to be one of the leading communities for many years to come.”